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2016 benefit plan limits and thresholds: few changes from 2015

The Internal Revenue Service (IRS) has announced various 2016 benefit plan limits and thresholds. In most cases, there are no changes from 2015. According to the IRS, in general, the retirement plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment. However, some other limitations will change because the increase in the index did meet the statutory thresholds.

Benefit Plans

The following chart shows the major 2015 and 2016 benefit plan limits and thresholds. Increased amounts for 2016 are underscored.

The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals age 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The deduction for contributions to a traditional IRA is phased out for those who have modified adjusted gross incomes (AGI) within a certain range. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s 2016 income is between $184,000 and $194,000, up from $183,000 and $193,000 in 2015. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range remains unchanged at $98,000 to $118,000. For single individuals and heads of household who are covered by a workplace retirement plan, the income phase-out range remains unchanged at $61,000 to $71,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The AGI phase-out range for taxpayers making contributions to a Roth IRA in 2016 is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000 in 2015. For single individuals and heads of household, the 2016 income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000 in 2015.

Wage Base for Social Security Taxes

In addition to the above adjustments, the Social Security Administration has announced that the wage base for Social Security taxes for 2016 will be $118,500, the same as in 2015.

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